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Nov. 16, 2009, 7:00 a.m. EST

Bristol to Split Off Mead

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By Jonathan D. Rockoff

Bristol-Myers Squibb /zigman2/quotes/202559280/composite BMY +1.71% Co. said it is moving to split off its nutritionals business in a deal valued at up to about $6.5 billion, an unusual bid to focus the drug maker on its core medicine business.

The unit, Mead Johnson Nutrition Co., is best known for its Enfamil infant formula. Bristol-Myers Chief Executive James Cornelius has wanted to concentrate the company on pharmaceuticals.

In doing so, Mr. Cornelius is taking the opposite tack of executives at other big drug makers. Merck & /zigman2/quotes/209956077/composite MRK -0.23% Co. recently took over Schering-Plough for $41.1 billion partly to obtain a consumer-products business that sells Dr. Scholl's foot supports. Pfizer /zigman2/quotes/202877789/composite PFE +0.64% Inc. acquired Wyeth also to diversify away from prescription medicines.

Other pharmaceutical executives are hoping that diversified offerings will cushion their companies against the inherent riskiness of developing new medicines. But Mr. Cornelius has been doubling down on pharmaceuticals, buying or partnering with smaller drug makers.

Early this year, Bristol-Myers took the first step toward getting rid of Mead Johnson. It held an initial public offering of stock in the unit worth a total 17% stake.

Seamus Fernandez, a Leerink Swann analyst, called the deal "financial engineering" that reduces Bristol-Myers' overall share count, but doesn't change the company's dependence on drugs in late-stage development, such as an anticlotting therapy called Apixaban it is developing with Pfizer, to come through. "The company still has to execute as a pharmaceutical company," he said.

Under the terms of the split, Bristol-Myers shareholders can exchange all, some or none of their company stock for shares in Mead Johnson. For each $1 of Bristol-Myers common stock, tendering shareholders will receive about $1.11 of Mead Johnson stock. The exact exchange ratio will be determined by a 10% discount to the average sales price of Bristol-Myers and Mead Johnson shares from Dec. 8 to Dec. 10.

With the split, Bristol-Myers will have "sharpened our biopharma focus, improved the overall financial strength of the company and supported our ability to pursue strategic business development opportunities," Mr. Cornelius said in a statement. Bristol-Myers' key products include anticlotting drug Plavix, which it sells with Sanofi Aventis /zigman2/quotes/206928357/delayed FR:SAN +1.42% SA, and schizophrenia drug Abilify.

Bristol-Myers owns 170 million shares of Mead Johnson. Bristol-Myers shareholders must buy at least 144.5 million shares for the transaction to go through.

Write to Jonathan D. Rockoff at jonathan.rockoff@wsj.com

/zigman2/quotes/202559280/composite
US : U.S.: NYSE
$ 58.76
+0.99 +1.71%
Volume: 12.47M
Sept. 22, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
3.06%
Market Cap
$130.21 billion
Rev. per Employee
$968,283
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/zigman2/quotes/209956077/composite
US : U.S.: NYSE
$ 82.94
-0.19 -0.23%
Volume: 7.77M
Sept. 22, 2020 4:02p
P/E Ratio
20.19
Dividend Yield
2.94%
Market Cap
$210.26 billion
Rev. per Employee
$615,159
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/zigman2/quotes/202877789/composite
US : U.S.: NYSE
$ 36.25
+0.23 +0.64%
Volume: 21.56M
Sept. 22, 2020 4:04p
P/E Ratio
14.42
Dividend Yield
4.19%
Market Cap
$200.16 billion
Rev. per Employee
$580,595
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/zigman2/quotes/206928357/delayed
FR : France: Euronext Paris
85.96
+1.20 +1.42%
Volume: 61,613
Sept. 23, 2020 9:08a
P/E Ratio
9.71
Dividend Yield
3.66%
Market Cap
€107.90 billion
Rev. per Employee
€330,656
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